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					INTERNET DIFFUSION


Nikhilesh Dholakia
University of Rhode Island

Ruby Roy Dholakia
University of Rhode Island

Nir Kshetri
University of Rhode Island




February 2003



Prepared for The Internet Encyclopedia, edited by Hossein Bidgoli, New York: Wiley,
2003 (forthcoming).

Acknowledgments: The authors are grateful to multiple reviewers of The Internet
Encyclopedia for detailed and valuable comments on earlier versions of this chapter.
INTERNET DIFFUSION

1. Introduction
2. Internet Diffusion: Historical Overview
   2.1. Internet Diffusion Prior to 1980
   2.2. Internet Diffusion During 1980-90
   2.3. Internet Diffusion After 1990
   2.4. Future scenario
3. Global Diffusion of the Internet
   3.1. Internet Diffusion in Africa
   3.2. Internet Diffusion in Asia
   3.3. Internet Diffusion in Europe
   3.4. Internet diffusion in Latin America and the Caribbean
   3.5. Internet Diffusion in North America
4. Theories of Diffusion and Adoption of Innovations
5. Factors Impacting the Diffusion of the Internet
   5.1. Economic Factors
   5.2. Socio-cultural Factors
   5.3. Geopolitical Factors
   5.4. Measures Taken by International Agencies
6. Summary and Conclusions

Glossary

Adoption of an innovation is a micro process that focuses on the stages through which an
individual passes when deciding to accept or reject the innovation.

ARPANET (Advanced Research Projects Agency Network), developed by ARPA with
support from the United States Department of Defense, can be considered as the origin of
all the networks, including the Internet. Arpanet lines were considered super fast for their
time, 56 kilobits per second. ARPA and DARPA are used interchangeably, as the agency
has used both names over the course of its existence.

Diffusion of an innovation is a macro process concerned with the spread of the
innovation from its source to the public.

Interface Message Processors (IMPs) are the packet switches developed by the Defense
Advance Research Project Agency (DARPA) in 1968.

Information and communications technologies (ICTs) include technologies that
facilitate the capturing, processing, storage, transfer, and presentation of information.




                                              2
Internet host refers to a computer system connected to the Internet — either a single
terminal directly connected or a computer system that allows multiple users to access
network services through it.

Network Control Protocol (NCP) was the initial ARPANET host-to-host protocol
developed by Network Working Group (NWG) in 1970.

NSFNET (National Science Foundation Network) was the first backbone for the U.S.
portion of the Internet. It was originally conceived as a way for researchers to submit jobs
to supercomputers located at various universities around the U.S.

Transmission Control Protocol/Internet Protocol (TCP/IP) was designed to meet the
needs of an open-architecture network environment. TCP verifies the correct delivery of
data from client to server. TCP adds support to detect errors or lost data and to trigger
retransmission until the data is correctly and completely received. IP is responsible for
moving packets of data from node to node. IP forwards each packet based on a four-octet
destination address known as the IP number. IP operates on gateway machines that move
data from department to organization to region and then around the world. In the future,
IP is projected to move to six-octet addressing.




                                             3
                                       ABSTRACT

This chapter provides an overview of the global diffusion of the Internet and examines
the factors that shaped and are continuing to shape the diffusion dynamics. The diffusion
pattern of an innovation such as the Internet is a function of economic, political, cultural
and geographical factors. In addition, business models vis-à-vis the cost to access the
Internet also influence the diffusion of the Internet. Since social systems worldwide differ
significantly in terms of these factors, diffusion patterns of the Internet also vary widely.
Among the factors hampering the faster diffusion of Internet in many countries are low
income levels, authoritarian governments with distaste toward the openness of the
Internet, sociocultural environments that are incompatible with the Internet, and
terrestrial and topographical barriers to landline networks. As a result, developing
countries account for disproportionately fewer numbers of Internet users and Internet
hosts worldwide, creating a global digital divide.




                                             4
                                    INTRODUCTION

Since the 1970s, the number of countries connected to the Internet has increased steeply

from 60 in 1993 to 214 in 2000 (see Figure 1). Despite this growth, the Internet has a

highly asymmetric global distribution (e.g., Kshetri 2001). There were 40 million people

worldwide using the Internet regularly in 1995 (Media Metrix 2000). This jumped to 131

million by the end of 1999 (Pastore 2000) and to 606 million by September 2002 . An

estimate by Angus Reid Group (2000) suggests that that there will be one billion Internet

users by 2005.

                          ______________________________

                                  Figure 1 about here
                           _____________________________

       Internet is the fastest diffusing Information and Communication Technology

(ICT) innovation to date. For instance, it took just 10 years for the Web-based Internet to

reach 50% of American homes, compared to 52 years taken by electricity and 71 years by

telephone (Thierer 2000). It took only three years for the Internet to reach 50 million

users. By contrast, it took 38 years for radio and 13 years for television to have 50 million

users (Bell and Tang 1998). During 1999, the number of Internet users increased by one

million every month (McLaren 1999).



                              ______________________________

                                   Figure 2 about here
                               _____________________________

       The global distribution of Internet penetration and use, however, is far from

uniform (see Figure 2 and Figure 3). Developed countries account for a

disproportionately high number of Internet users worldwide: 61.7% of the world’s


                                             5
Internet users live in North America and Europe, for instance, but they account for less

than 20% of the world’s population. As of May 2002, less than 0.1% of Africans had

access to the Internet compared to 52.2% of North Americans. Similarly, as of 2000,

developing countries with 84% of the world’s population had fewer than 6% of world’s

Internet users (Futurist 2000). The discrepancy is even greater for the number of Internet

hosts worldwide: North America and Europe account for almost 90% of Internet hosts

while Asia-Pacific with over 60% of the world’s population and 31% of the world’s

Internet users contribute only 8% of the total number of Internet hosts worldwide .

                          ______________________________

                                  Figure 3 about here
                           _____________________________

       There are, however, some encouraging signs. For instance, Internet users

worldwide grew by 30% in 2001 and one third of the new users were from developing

countries (UNCTAD 2002).

       Since the Internet is a “new product”, an analysis of the pattern of its spread

worldwide and within a given country from the perspective of innovation diffusion and

adoption literature could provide valuable insights into the factors driving the diffusion

dynamics (Takacs and Freiden 1998). Diffusion and adoption patterns of an innovation

are functions of several elements including characteristics of the innovation itself, the

channel of communication, the nature of the social system, and time (Rogers 1983).

       Since social systems around the world differ in terms of several dimensions,

diffusion patterns of the Internet vary widely across countries. In this chapter, some of the

key differences in Internet diffusion pattern around the world would be highlighted.




                                              6
       In the chapter, we examine the global diffusion of the Internet and the factors

influencing the diffusion dynamics. The remainder of the chapter (a) provides a brief

historical overview of global Internet diffusion, (b) discusses the global diffusion patterns

of the Internet, (c) integrates theories from diverse perspectives that help explain the

diffusion and adoption phenomena, (d) discusses the factors that are likely to shape the

global diffusion of the Internet, and (e) provides some conclusions.

                INTERNET DIFFUSION: HISTORICAL OVERVIEW


The Internet passed through various stages to arrive at the present situation. The first

wide area network (WAN) was developed in 1965. It took another four years for the first

two hosts in the ARPANET to be connected. The graphical format of Internet as we

know it now emerged in the 1990s.

Internet Diffusion Prior to 19801


President Eisenhower’s request for funds to create the Advanced Research Projects

Agency (ARPA) within the U.S. Department of Defense in 1958 laid the foundation for

the Internet. The packet switching theory first published by Leonard Kleinrock of MIT in

1961 was a major step towards computer networking. In August 1962, J.C.R. Licklider,

also of MIT, proposed the “Galactic Network” concept. The Galactic Network concept

provided a remarkably prescient view of contemporary Internet – it envisioned a set of

globally interconnected computers through which data and programs could be accessed

from any site. In October 1962, Licklider became the head of the computer research

program at Defense Advanced Research Projects Agency (DARPA). He also convinced

his successors at DARPA of the importance of the networking concept. Under a military




                                              7
contract, Paul Baran of Rand Corporation wrote key memoranda in the early 1960s

outlining the “survivability” of a distributed, packet-switched network, even under

conditions of a major nuclear attack. As Rand Corporation states in its historical notes2:

        All of the nodes in this unusual network would have equal status; be autonomous;
        and be capable of receiving, routing, and transmitting information. Under Baran’s
        concept of distributed communications – now called packet switching – each
        message would be broken into a series of short, fixed-length pieces, and each
        would be sent as an individually addressed packet that would find its own way
        through the network by whatever route happened to become available, jumping
        from node to node until it reached the final destination. If parts of the network
        were destroyed, the self-sufficiency of each node plus the data within the packet
        allowed the node to seek alternative ways of moving the packet along.


        Next, it was necessary to make the computers ‘talk’ to each other. In 1965, MIT

researchers Thomas Merrill and Lawrence G. Roberts were able to connect the TX-2

computer in Massachusetts to the Q-32 in California. This was the first wide-area

computer network. In 1966 Lawrence G. Roberts, who had joined DARPA, put together

his plan for the ARPANET.3 Kleinrock’s Network Measurement Center at UCLA was

selected to be the first node on the ARPANET in September 1969. In October 1969,

Stanford Research Institute (SRI), about 350 miles to the North of UCLA, provided a

second node and the first host-to-host message was sent from Kleinrock’s laboratory to

SRI. Two more nodes were added at University of California at Santa Barbara and

University of Utah. Four host computers were connected together into the initial

ARPANET, the forerunner of today’s Internet, by the end of 1969.



1
  This section draws from Leiner et. al. (2002).
2
  See http://www.rand.org/history/baran.html
3
  It is interesting to note that independent of the U.S. efforts, Donald Davies of the National Physical
Laboratory (NPL) in U.K. proposed development of a nationwide packet communications network, based
on a packet size of 1024 bits – the same packet size that Paul Baran had proposed in the U.S.



                                                    8
       The number of computers connected to the ARPANET grew rapidly after 1970

(See table 1). In December 1970, the Network Working Group (NWG) finished the initial

ARPANET host-to-host protocol, called the Network Control Protocol (NCP). As the

ARPANET sites completed implementing NCP during the period 1971-1972, the

network users finally could begin to develop applications. In 1972, electronic mail was

introduced. Bolt, Beranek and Newman (BBN), a consulting firm started by MIT

professors Richard Bolt and Leo Beranek and their student Robert Newman, sent the first

person-to-person email using the @ symbol in the address. To meet the needs of an open-

architecture network environment, Bob Kahn and Vint Cerf developed the Transmission

Control Protocol/Internet Protocol (TCP/IP) in 1973. TCP/IP proved remarkably resilient

and enduring as a means of managing data communications networks.

                         ______________________________

                                 Table 1 about here
                          _____________________________

       Starting from the mid-1970s, computer networks grew rapidly. ARPANET

expanded internationally by connecting to University College of London (England) and

NORSAR (Norway) in 1973. Most of the early networks, however, were closed

communities of scholars. There was virtually no pressure for the individual networks to

be compatible and hence they were not.

Internet Diffusion During 1980-90

Various developments in the 1980s facilitated the diffusion of the Internet. The number

of Internet hosts grew by 500 folds in this period, from 200 in 1980 to 100,000 in 1989

(Table 1). In 1980, Tim Berners-Lee wrote the program known as “Enquire Within”

which was a predecessor to the World Wide Web (WWW). Other developments include



                                            9
IBM’s announcement of the first personal computer in 1981 and foundation of Cisco

Systems in 1983.

       The ARPANET host protocol changed from NCP to TCP/IP on January 1, 1983

to meet the needs of an open-architecture network. In the November of 1983, the domain

name systems (DNS) such as .edu, .gov, .com, .mil, .org, .net, and .int were created.

Symbolic.com became the first registered domain on March 1, 1985. In 1985, the

National Science Foundation (NSF) also decided that TCP/IP would be mandatory for the

NSFNET program.

Internet Diffusion after 1990s

The Internet was opened to the public in the early 1990s. Major technological

developments such as Tim Berners-Lee’s creation of the World Wide Web (WWW),

development of Mosaic Web browser in 1993, Sun Microsystems’ release of Java, and

release of Windows 1995 further facilitated the diffusion of the Internet (Webopedia

2002). As a result, the Internet grew significantly in the 1990s, in terms of the number of

hosts, number of users, and global coverage. The number of Internet hosts increased from

200,000 in 1990 to 104 million in 2000. By 1990, major countries across the world such

as Australia (AU), Germany (DE), Israel (IL), Italy (IT), Japan (JP), Mexico (MX),

Netherlands (NL), New Zealand (NZ), Puerto Rico (PR), United Kingdom (UK),

Argentina (AR), Austria (AT), Belgium (BE), Brazil (BR), Chile (CL), Greece (GR),

India (IN), Ireland (IE), Korea (KR), Spain (ES) and Switzerland (CH) were already

connected to the NSFNET (Goldstein 2000). Several smaller and less developed

countries were gradually connected to the Internet.




                                            10
Future Scenarios

Along with the exponential growth in the number of Internet users worldwide, newer

means to access the Internet keep appearing. In particular, Internet access by mobile and

broadband technologies is experiencing rapid growth worldwide. For instance, by 2009,

cellular phone subscribers in the world are expected to outnumber fixed line subscribers

(ITU 2000). Furthermore, over 25% of e-commerce is estimated to take place over

handheld sets by 2005 (Shaffer 2000).

       The number of broadband subscribers worldwide is estimated to cross 46 million

by the end of 2002 (High-Speed Internet Access 2002). The annual worldwide broadband

growth rate for the period 2002-04 is projected to be in the range of 61% to 150%

(Lammers 2001). Whereas cable modem service is gaining popularity in the U.S., Digital

Subscriber Line (DSL) has become the main broadband access technology outside the

U.S. Other broadband access technologies such as satellite broadband, fiber-to-the-home,

and fixed wireless service accounted for 5% of the worldwide broadband market in 2002

(Communications Today 2002).

                     GLOBAL DIFFUSION OF THE INTERNET


Starting with just a few countries in 1990, the number of countries connected to the

Internet crossed 200 by mid-1998 (WIPO 2000) and 214 in 2000. The diffusion pattern

of the Internet, however, varies widely across the world. Table 2 details the global

distribution of the number of Internet users in September 2002. North America, where

the Internet originated, has over 182 million users accounting for 30% of the world’s

users but only 5.6% of the world’s population. Europe, with its early connection to the

ARPANET, currently has the highest number of Internet users (over 190 million). Asia-



                                            11
Pacific, with over 60% of the world’s population, is experiencing some of the most rapid

growth in recent years and is expected to double its number of Internet users by 2005.

                               ______________________________

                                       Table 2 about here
                                _____________________________

Internet Diffusion in Africa and the Middle East

In the Middle East region, Israel was a pioneer in connecting to the Internet – in 1989,

along with selected, key European and Asian nations. African and other Middle Eastern

nations came to the Net much later. By connecting with the global network in 1993,

South Africa and Tunisia became the first African countries to join the Internet

(Tripod.com 2002). By 1998, all African countries except Congo had Internet connection

(CITI 2000; Tripod.com 2002). South Africa dominates this region’s Internet market4

followed by Israel, Egypt, United Arab Emirates, and Saudi Arabia (Table 3).

                               ______________________________

                                           Table 3 about here
                                _____________________________

         According to the State of the Internet Report 2000 of the U.S. Internet Council,

Internet diffusion in Africa has been hampered by factors such as poverty, low computer

penetration, illiteracy, lack of trained personnel, disinterest and a failure to understand the

benefits of Internet access (CITI 2000).

Internet Diffusion in Asia Pacific

Internet is growing very rapidly in the Asia-Pacific region. The number of Internet users

in this region is expected to increase to 374 million by the end of 2005 (Rao 1999).

4
 In discussing ICTs in Africa, Ya’u (2002) tellingly points out that “of the 157,325 Internet hosts in
Africa, 144,445 are in South Africa, leaving less than 10,000 for the rest of Africa.”



                                                     12
Japan, South Korea, Taiwan and New Zealand dominate the region’s Internet market so

far (Table 4). China and India, however, are the fastest growing Internet markets in this

region (Javalgi and Ramsey 2001; Kshetri 2002). Each is expected to have more Internet

users than the U.S. by 2010 (Nua Internet Surveys 1999b).

                          ______________________________

                                 Table 4 about here
                          ______________________________

Internet Diffusion in Europe

Most of the European countries introduced the Internet much earlier than their

counterparts in Asia, Africa, and Latin America. For instance, University College of

London (England) and NORSAR (Norway) were connected to the ARPANET as early as

in 1973. Similarly, Germany (DE), Italy (IT), Netherlands (NL), and United Kingdom

(UK) were connected to the NSFNet in 1989 and Austria (AT), Belgium (BE), Greece

(GR), Ireland (IE), Spain (ES) and Switzerland (CH) were connected in 1990 (Goldstein

2000). Germany and the U.K. dominate the Internet market of this region (Table 5).

                          ______________________________

                                 Table 5 about here
                          ______________________________


Internet Diffusion in Latin America and the Caribbean

Compared to North American and European economies, the Internet is a relatively new

phenomenon in Latin America and the Caribbean. The region, however, is experiencing

phenomenal growth in the number of Internet users. A survey conducted by Nazca

indicated that use of the Internet tripled in this region between 1995 and 1997 (Tudor

1999). The networks in most of the Latin American economies were established during




                                            13
1995-99 (Hahn 1999). By connecting to NSFNet in 1989, Mexico became the first

country in Latin America to connect to the Internet (Goldstein 2000). As table 6

indicates, big Latin American economies such as Argentina, Brazil, and Mexico dominate

the Internet population in the region.

                          ______________________________

                                 Table 6 about here
                          ______________________________

Internet Diffusion in North America

North America, the original locus of the Internet, accounts for disproportionately higher

numbers of Internet hosts and Internet users compared to the rest of the world. By 1999,

the U.S. had over 98 million Internet users and 40 million hosts (Euromonitor 2001b).

Canada, similarly, had over 11 million Internet users and 1.4 million Internet hosts by

1999 (Euromonitor 2001b). These numbers have been growing rapidly, and reaching

saturation levels.

Unconnected Pockets

Most of the countries that connected to the Internet very late, connected in very limited

ways, or did not connect at all did so not because of economic reasons but because of

political or religious reasons. Commenting on Internet-free countries in 1996, Maslen

(1996) made the following observations:

       In June 1996, just twenty countries remained with absolutely no e-mail or Internet
       connection: Afghanistan, Bhutan, Burma, Burundi, Congo, Gabon, Guinea
       Bissau, Iraq, Liberia, Libya, Mauritania, North Korea, Oman, Rio Muni, Rwanda,
       Somalia, Syria, Western Sahara, Yemen, and Zaire. … Of these countries, more
       than half are in Africa, in most cases only recently (fifty years or less) free from
       colonial rule…. Many of these countries are not wealthy, but there are surprising
       exceptions. Libya, Western Sahara, Oman and Gabon are relatively affluent, so
       their abstention from the Internet cannot be explained in purely economic terms.
       Politics, economics and international diplomacy have always been involved in the
       spread of the Internet. Sixteen of these twenty ‘unwired’ countries are Islamic, or


                                            14
       have large Islamic populations. …At least six Internet-free countries have been
       involved in destructive internal or external conflicts in the last ten years… Iraq,
       Libya, North Korea and Somalia (a fifth of the no-Internet countries) have all
       been on poor (or hostile) diplomatic terms with the United States … [There is
       also] a definite (two-way) correlation between countries’ levels of democracy and
       Internet connectivity. Sixteen of the twenty unconnected nations possessed very
       low levels of democracy.

        THEORIES OF DIFFUSION AND ADOPTION OF INNOVATIONS

A deeper and richer understanding of the multifaceted and complex processes of

diffusion and adoption of the Internet requires an integration of theories from diverse

perspectives such as political science and international relations, sociology, marketing,

communications, information systems, and geography.

       Theoretical and empirical evidence suggests that politics and government policy

play important roles in the diffusion of modern ICTs. Diffusion theories that relate

diffusion pattern with political structure in a country argue that a technology is not

equally compatible with all types of political structures. These theories, for instance,

predict that authoritarian governments have relatively less favorable attitudes towards

developing interpersonal means of communications such as the telephone and the Internet

(e.g., Groth and Hunt 1985; Kshetri 2001; Kshetri and Dholakia 2001). Groth and Hunt

(1985), for instance, postulate that Marxist governments allocate relatively smaller

proportion of resources for the development of interpersonal communications means. The

unfavorable attitude towards the Internet has hampered the growth of Internet in countries

with authoritarian regimes such China, Cuba, and Syria.

       Diffusion of innovations also entails “interaction between life-experience and

history” (Erben 1993) and hence theories from sociology may help explain some aspects

of the diffusion dynamics. For instance, the cultural imperialism hypothesis (Tomlinson




                                             15
1991) – western control of mass media combined with human desire to improve their

lives leads consumers from developing countries to imitate the developed ones – could

help explain the role of global media in the diffusion of modern ICTs in developing

countries. Similarly, the technology-society compatibility (Gatignon and Robertson 1985;

Rogers 1983) theories could help explain why a particular technology is more compatible

in certain societies than others. Past research has found that the ‘country-level effects’ or

the ‘societal effects’ (Kshetri and Dholakia 2002; Zaheer and Zaheer 1997) have strong

influence on technology adoption behavior of firms and individuals in a country.

       Since diffusion of innovation requires an understanding of “people, hardware,

software, communication networks and data resources that collects, transforms, and

disseminates information” (O’Brien 1996), theories from information systems are well

suited for explaining such aspects of the diffusion and adoption phenomena.

       Diffusion and adoption of ICTs entail decisions at various levels (individual,

organization, national, international) about allocation of scarce resources (Andrews

2002). Economic theories help explain how individuals, organizations and governments

make decisions regarding the allocation of resources in ICT investment. Basic demand

and supply theories are helpful in explaining the varied distribution patterns of the

Internet across countries. For instance, income can be expected to be positively

associated with the demand of modern ICT products (Gatignon and Robertson 1985;

Rogers 1968, 1983).

       Geography and geopolitics are important aspects of international business in

general (As-Saber, Liesch and Dowling 2000) and global diffusion of innovations in

particular. Geopolitical theories help in answering questions such as, “… Why are things




                                             16
located where they are? How do different places relate to each other? How have

geographic patterns and relationships changed over time?” (Baerwald 1996, p. 23).

Geopolitical variables include population (Cohen 1963) as well as characteristics of

populations such as skills, educational qualifications, productivity, and the cost of labor

(As-Saber, Liesch and Dowling 2000; Baerwald 1996). Literacy rate and English

language skills are other geopolitical factors likely to influence the diffusion of

innovations. Such skills are associated with the availability of information and the

proficiency required to use a new technology or the ‘inter-relatedness’ among users and

producers of the technology (Cassiolato and Baptista 1996). The diffusion of a

technology is negatively related to the disparity between the skills needed to use the

technology and the consumer’s existing knowledge (Gatignon and Robertson 1985). High

illiteracy rates have hampered the adoption of the Internet in less developed countries.

Geopolitical variables such as geographical distance between adopting units (Gatignon

and Robertson 1985) influence the level of terrestrial barriers and hence the diffusion of

the Internet. Origination of the Internet in the U.S. is one of the major factors

responsible for the disproportionately higher number of Internet users in North America.

Furthermore, high-bandwidth backbones were created first in North America, followed

by Europe, and the data traffic to other regions was constrained by low-bandwidth

connections.

          FACTORS IMPACTING THE DIFFUSION OF THE INTERNET


Economic Factors

Economic factors such as income level, availability and price structures of ICT products

and services, and bandwidth and supporting infrastructures influence the diffusion of the


                                             17
Internet (Kshetri 2001). The cost of a PC as a proportion of GDP, for instance, is 5 per

cent in high-income countries compared to about 300 per cent in low-income countries

(ITU 2001a). In January 2001, the price of the cheapest Pentium III computer was US$

700 (UNDP 2001b), an amount much higher than the average per capita GDP of most

developing countries. Similarly, monthly Internet access charge as a proportion of per

capita GDP in 2001 varied from 1.2 percent in the U.S. to 118 per cent in Sierra Leone

(ITU 2001a).

       Economic factors influence the means used to access the Internet. Many people in

developing countries who cannot afford PCs, can access the Internet through public

kiosks and cafes at much lower rates (e.g., Kirby 2002). Paging networks are popular in

China because of the higher costs of computer and the fixed Internet access

(Ebusinessforum.com 2000). In Japan, the popularity of NTT DoCoMo’s i-Mode

services, and the government’s effort to lower the cost of data flow over the mobile

network, accelerated the growth of mobile Internet (Stout 2001).

       Finally, bandwidth availability is a determinant of Internet adoption and diffusion.

In general, it is very low in developing countries. For instance, 50 percent of the

worldwide bandwidth capacity is in North America compared to 3 percent in the Middle

East and Africa (Frontline.net 2001). Lower bandwidth results in longer time to transfer

data and hence low relative advantage of Internet use. Moreover, the lack of intraregional

infrastructures in developing nations of Asia, Africa and Latin America means that even

Internet communications with neighboring countries have to be routed through the U.S.

or other industrialized countries in Europe, further increasing the costs. When high




                                             18
bandwidth is available and reasonably priced, as in South Korea, it becomes a driver of

rapid Internet diffusion.

Sociocultural Factors

The degree of compatibility of the Internet and its various uses with the values and norms

of a social system (Rogers 1983) influences its diffusion patterns in that social system.

An examination of the ‘values’ and ‘culture’ inherent in the Internet, thus, helps predict

the degree of acceptance or rejection of the Internet in a society. An important component

of the value system is related to skills required to use the Internet. Literacy and computer

skills are almost the prerequisites to Internet use. A large proportion of the population in

developing countries is illiterate and still higher proportion lacks computer skills.5

Moreover, Internet tends to favor the English-speaking population because most of the

software and interfaces used in the Internet are in English. Also, a large proportion of the

WWW content is in English language. For instance, a survey conducted in 1998 found

that about 85 per cent of the texts on the WWW were in English (Nunberg 2000), which

decreased to about 80 percent in 1999 (Nua Internet Surveys 1999a).

         Internet’s asynchronous nature and impersonal style of communications tend to

make it incompatible with the cultures of some societies. For instance, in Japan personal

correspondence is normally handwritten to show respect and courtesy (James 1998).

         Another component of the Internet’s value system has to do with the place of

origin of the core technology as well as the bulk of the content. The Internet originated in


5
 Some attempts to overcome the literacy and language barriers are under way. One such attempt is the
creation of the Simputer (Sterling 2001), “a small hand-held device designed for the rough conditions of
rural India. It operates – without a keyboard – through touch, sound and simple visual icons. It translates
English-language Web sites into local Indian languages, reading the content aloud to illiterate users.”



                                                     19
the U.S. and most of the content available on the WWW originates in the western

countries. Many people in the East, thus, tend to doubt the integrity of information

originating from the Western world and view the use of English as a vehicle for

executing an electronic “Pax Americana” (Shabazz 1999).

Geopolitical Factors

National institutions can take measures to influence an innovation as well as its diffusion.

As discussed in the previous section, then U.S. President Eisenhower took initiatives to

create the Advanced Research Projects Agency (ARPA) within the U.S. Department of

Defense in 1958, thereby laying the foundation for the Internet. Similarly, measures taken

by the National Science Foundation (NSF) in 1985 to make the TCP/IP the mandatory

protocol accelerated the diffusion of the Internet.

       Political support strongly influences the diffusion pattern of the Internet.

Investments in modern ICTs alone will not bridge the digital divide in the absence of

such political support (Koss 2001). Internet diffusion in several countries, especially the

developing ones, has been hampered by political factors such as authoritarian

governments’ concern about the flow of information on the Internet, tariff/non-tariff

barriers to ICT products, and unfavorable regulatory environments that negatively

influence the telecom markets (Kshetri 2001). The Internet has been described as “the

greatest democratizer the world has ever seen” (Pitroda 1993, p. 66). It is, thus,

incompatible with most of the authoritarian regimes. Threatened by free flow of

information on the Internet and the possible negative impact on their “right to rule”,

authoritarian regimes such as those of Malaysia, China, Singapore, Syria, and Cuba have

opted for several mechanisms to control the Internet. For instance, the Chinese



                                             20
government closed 150,000 unlicensed Internet cafes following a deadly fire in a Beijing

Internet cafe and the remaining cafes are required to install software that prevents access

to up to 500,000 banned pornographic sites or sites with “subversive content” (BBC

News 2002). Similarly, a recent study conducted by Harvard Law School found that a

central array of proxy servers in Saudi Arabia filters and blocks “sexually explicit”

content (Hermida 2002).

       Authoritarian regimes are also slow to enact laws to recognize digital and

electronic signatures (DES) (Kshetri and Dholakia 2001). Many democratic governments

lack DES laws as well. By the end of 2000, for instance, only about 45 nations in the

world had laws recognizing DES (Stephens 2001). Lack of DES laws has hampered the

use of the Internet for commercial and government services in several countries.

       Tariff and non-tariff barriers and regulations in telecom markets are hindering e-

commerce development in some developing markets. Many developing countries tend to

treat ICT products as luxury items and impose import duty, surtax, value added tax, sales

tax, etc., making these products expensive and unobtainable (UNCTAD 2000).

Measures Taken by International Agencies

Several international institutions have launched ICT-led initiatives to accelerate the

diffusion of the Internet (Kshetri 2001, 2003; Shadrach 2002). First, international

agencies have helped introduce the Internet for the first time in developing countries that

lacked the infrastructures for the Internet (Brown et. al. 1976). In this way, the

international agencies are breaking the “hierarchical pattern” (Gatignon and Robertson

1985, p. 858) of Internet diffusion – a pattern of slow trickle-down of innovations from

the rich to the poor. The United Nations Development Program (UNDP) introduced the



                                             21
Internet in more than fifteen countries by connecting them to the global network (UNDP

2001). Similarly, the World Bank initiated the Information for Development Program

(InfoDev) in1995 to promote projects emphasizing the use of ICTs for economic and

social development. This program has a special emphasis on the needs of the poorest in

developing countries.

       Second, some international agencies are helping to reduce the gap between skills

required for Internet use and existing skills of potential users in developing countries. By

early 2001, for instance, UNDP had trained over 25,000 organizations and helped create

over 40,000 websites for governments and civil society stakeholders (UNDP 2001).

       Third, international institutions are influencing national governments to increase

the level of competition in the telecom sector, which has resulted in the availability of

higher quality ICT products and services at lower prices. In 1997, 60 developing

countries made commitments to the World Trade Organization (WTO) to introduce

competition in the telecom sector. Similarly, 13 developing countries also signed the

Information Technology Agreements (ITA) under the WTO to eliminate customs duties

on seven broad categories of ICT products.

       Fourth, international institutions are facilitating the Internet adoption by small and

medium sized enterprises (SMEs), which otherwise may be reluctant to adopt the

Internet. The United Nations Conference on Trade and Development (UNCTAD)

launched the Global Trade Point Network (GTPN) in 1992. Its objective is to facilitate

Internet adoption by SMEs, especially for accessing global markets. As of 2000, its

electronic trading opportunity (ETO) system connected more than 20,000 trade

organizations worldwide.



                                             22
       Fifth, international institutions are influencing national laws, regulations and

policies, and are making them more conducive to the use of the Internet for various

purposes. The UN Commission on International Trade Law (UNCITRAL) undertook a

major initiative leading to the adoption of the Model Law on E-Commerce. Many

countries around the world have enacted new Internet laws by taking UNCITRAL model

law as the guideline. The World Intellectual Property Organization (WIPO) member

states also approved the establishment of WIPOnet, which provides basic, secure Internet

connectivity and services to the intellectual property offices. Similarly, International

Chamber of Commerce (ICC) has developed a model contract for privacy and transborder

data flows. The Organization for Economic Cooperation and Development (OECD), in a

similar manner, has developed action plans to address issues related to authentication,

certification, consumer protection, and privacy in the use of the Internet (Kshetri 2001).

       The differences in social systems across the world have been selectively

summarized in Table 7 to show the influence of several factors shaping the diffusion

dynamics of the Internet. It is quickly evident that countries with the lowest Internet

penetration levels also have the highest restrictions on civil liberties (e.g. Sierra Leone,

Pakistan and Cuba). It is possible to overcome some of the barriers to Internet

penetration created by restricted civil liberties through high literacy levels, as in the case

of China and Singapore. In addition to an open society and high literacy, economic

resources are also necessary. Countries with the highest Internet penetration levels also

have the highest levels of per capita income (e.g. USA, Finland). Finally, socio-cultural

factors such as English language skills explain some of the differences in Internet

penetration between Australia and Japan.




                                              23
                           ______________________________

                                  Table 7 about here
                           ______________________________

                           SUMMARY AND CONCLUSIONS


In this chapter, we provided an overview of the global diffusion of the Internet and

examined the factors that have shaped and are continuing to shape the diffusion dynamics

of the Internet. The diffusion pattern of an innovation such as the Internet is a function of

economic, political, cultural, and geographical factors. Since social systems across the

world differ significantly in terms of these factors, diffusion patterns of the Internet also

vary widely across nations. Low levels of income, authoritarian governments’ distaste

toward the Internet, sociocultural environments that are incompatible with the Internet,

and terrestrial barriers have hampered the rapid diffusion of the Internet in developing

countries. As a result, developing countries account for a disproportionately lower

number of Internet users and Internet hosts worldwide. Enlightened public policies,

forward-looking corporate strategies, and concerted efforts by international agencies are

of value in extending the reach of the Internet to all parts of the globe.




                                              24
Table 1: Growth in the number of Internet hosts

Year No. of hosts      No. of       Remarks
                       hosts (In
                       millions)
 1965              2           --   TX-2 and Q-32 connection.
 1970              4           --   ARPANET project had a backbone of 4 computers.
 1972                          --   E-Mail introduced
 1973                          --   TCP/IP developed
 1975            100           --
 1980            200           --“Enquire Within”, predecessor of WWW,
                                 developed
 1985         2,000           -- TCP/IP mandatory for NSFNET
 1986         5,000           --
 1987        10,000           --
 1989       100,000          0.1
 1990       200,000          0.2 NSFNET succeeded ARPANET
 1993     2,700,000          2.7 Mosaic Web Browser developed
 1994     5,800,000          5.8
 1995    14,000,000         14.0 Windows 95
 1996    22,000,000         22.0
 1997    30,000,000         30.0
 1998    43,000,000         43.0
 1999    72,000,000         72.0
 2000   104,000,000        104.0

Source: ITU (2001b); Schwimmer (2002), Webopedia.com (2002), and authors’ research.




                                           25
Table 2: Geographical distribution of the Internet users worldwide (September 2002)

              World Region      Number of Internet users       Remarks
     (% of world population)    (% of world users)
             North America      182.67 million                 Enjoys many
  (5.6% of world population)    (30.2% of the total Internet   advantages. The place of
                                users in the world)            origin of most Internet
                                                               technologies.
                    Europe 190.91 million                      Early connection to
 (13.5% of world population) (31.5% of the total Internet      ARPANET proved to be
                             users in the world)               of great value.
                Asia-Pacific 187.24 million                    Some of the most
 (60.2% of world population) (30.9% of the total Internet      rapidly growing Internet
                             users in the world)               markets located here.
             Latin America 33.35 million                       Except Mexico, Internet
  (8.3% of world population) (5.5% of the total Internet       entered late, but is
                             users in the world)               growing very fast.
         Africa/Middle East 11.43 million                      Israel was a pioneer.
 (12.4% of world population) (1.9% of the total Internet       Sub-Saharan Africa was
                             users in the world)               very late. South Africa
                                                               dominates.
                World (Total) 605.60 million                   Expected to reach a
                                                               billion or more by the
                                                               end of the decade.
Sources: Kshetri and Dholakia (2002),
http://www.nua.ie/surveys/how_many_online/index.html, authors’ research




                                          26
Table 3: Internet users (IU) and Internet hosts (IH) in Africa and Middle East (1999)

                                                                   IH per 1000
                                   IU per 1000                     people
Country               IU (1999)    people (1999)     IH (1999)     (1999)
Algeria                       4000               4.0           158         0.005
Angola                       15400               1.2            12        0.0009
Botswana                     30000             18.8            790            0.5
Burkina Faso                  3200               0.3           211          0.02
Burundi                        700                03            54         0.008
Cameroon                      8000               1.3             6        0.0004
Cape Verde                     250             12.5
Central African
Republic                       900                0.3              8           0.002
Cote d'Ivoire                15000                1.3            254            0.02
Djibouti                      1300                2.2              6           0.009
Egypt                       350000                4.4           3025            0.04
Ethiopia                     10000                0.1             78           0.001
Ghana                        18000                1.0            211            0.01
Iran                        250000                1.5            293           0.004
Israel                      946000              171.1         143230            23.4
Jordan                       85300               17.5            518            0.07
Kenya                        52000                1.5            926            0.03
Kuwait                       95000               50.7           8536              4.5
Lebanon                     210000               63.6           4291              1.3
Lesotho                       1000                0.5             19           0.009
Liberia                        400                0.2           1350              0.5
Libya                         6800                1.2
Madagascar                    5300                0.3            122           0.007
Malawi                        7000                0.7              1        0.00009
Maldives                      3000               10.0            160             0.5
Mali                          1900                0.2              1        0.00009
Mauritania                  160000               61.6             21          0.008
Mauritius                    45000               39.1            776             0.7
Morocco                     160000                5.7           2719            0.09
Mozambique                   17000                0.9            254            0.01
Namibia                      14000                8.3           5175            3.05
Niger                         1400                0.1             36          0.003
Nigeria                      12000                0.1            820          0.007
Oman                         35000               14.2            668            0.27
Qatar                        40000               67.9             20            0.03
Rwanda                         450                0.1
Saudi Arabia                230000               11.0            638            0.03
Senegal                      12750                1.4            320            0.03



                                           27
Seychelles                  4500         57.0        7       0.09
South Africa             1899000         47.6   165600        4.1
Sudan                       3400          0.1        1   0.00003
Swaziland                   4200          4.3      300        0.3
Syrian Arab Rep            17000          1.1        1   0.00006
Tanzania                    9500          0.3      250      0.007
Tunisia                    78000          8.2       30     0.003
Uganda                     35000          1.7      776       0.03
United Arab Emirates      350000        146.0    35000       14.6
Yemen Republic             10000          0.6       30      0.002
Zambia                     12000          1.3      400       0.04
Zimbabwe                   35000          3.0     1585        0.1

Source: Euromonitor (2001a, b)




                                   28
Table 4: Internet users (IU) and Internet hosts (IH) in Asia-Pacific (1999)

                        IU per 1000     IH      IH per 1000 people
Country      IU (1999) people (1999) (1999) (1999)
Armenia            4500             1.3    1788                 0.5
Australia      5000000            267.3 950400                50.8
Azerbaijan         1378             0.2     522                 0.1
Bahrain           36000            59.4     866                 1.4
Bangladesh         2400            0.02
Bhutan            25500             0.2      54               0.02
Brunei            20000            62.1    2390                 7.4
Cambodia           2450             0.2      90              0.008
China          7000000              5.5 25882                 0.02
Hong Kong      1500000            220.5 99600                 14.6
India          2500000              2.5 24518                 0.02
Indonesia      1360000              6.5 22399                   0.1
Japan         20458000            162.1 2337880               18.5
Kazakhstan        40000             2.4    1776                 0.1
Kyrgyz Rep         5024             1.1    2500                 0.5
Lao PDR           26300             5.0
Macao             75000           160.6     150                 0.3
Malaysia       1200000             55.0 57422                   2.6
Mongolia           3600             1.4      25              0.009
Nepal             30000             1.3     168              0.007
New Zealand     800000            209.0 145000                37.9
Pakistan        100000              0.7    6192               0.04
Philippines     380000              5.1 16330                   0.2
Singapore      1200000            340.7 73810                 21.0
South Korea 10106000              215.5 276468                  5.9
Sri Lanka         40000             2.1     550               0.03
Taiwan         4790000            216.6 509850                23.1
Tajikistan                                  148               0.02
Thailand        650000             10.7 28860                   0.5
Turkmenistan                                300                 0.1
Uzbekistan        25000             1.1     472               0.02
Vietnam           25000             0.3      34             0.0004

Source: Euromonitor (2001a, b)




                                            29
Table 5: Internet users (IU) and Internet hosts (IH) in Europe (1999)
                                   IU per 1000 people                     IH per 1000
Country              IU (1999) (1999)                    IH (1999)        people (1999)
Austria                   1650000                 201.8            259500            31.7
Belarus                     10000                      1             1578             0.2
Belgium                   1840000                 181.2            365155            36.0
Bulgaria                   210000                  25.4             14935             1.8
Croatia                    400000                  89.3             10457             2.3
Cyprus                      60000                  77.1              8334            10.7
Czech Republic             550000                  53.5            116750            11.4
Denmark                   2100000                 397.6            417200            79.0
Estonia                    250000                   177             34062            24.1
Finland                   2088550                 404.3            483000            93.5
France                    7200000                 122.2            702625            11.9
Georgia                       8750                   1.7             1107             0.2
Germany                  12300000                 149.7           1721150            20.9
Gibraltar                     1801                                    379             0.0
Greece                    1480000                 139.3             34515             3.2
Hungary                    450000                  44.7            139000            13.8
Iceland                    135000                   135             31250            31.3
Ireland                    500000                 155.1             76526            23.7
Italy                     9100000                 158.7            579900            10.1
Latvia                     150000                  62.8             25081            10.5
Lithuania                  140000                     38            18819             5.1
Luxembourg                  75000                 176.1             10831            25.4
Macedonia                   45000                  22.4              1853             0.9
Malta                       40000                 103.6              2849             7.4
Moldova                     25000                    5.7             2040             0.5
Netherlands               4100000                 260.6            871000            55.4
Norway                    2000000                 450.2            342925            77.2
Poland                    1950000                  50.3            178160             4.6
Portugal                   800000                     81            70000             7.1
Romania                    385000                  17.2             38791             1.7
Russia                    5400000                  36.7            230176             1.6
Slovakia                  1000000                 185.8             32045             6.0
Slovenia                   490000                 246.4             26335            13.2
Spain                     3625000                  91.5            460500            11.6
Sweden                    3950000                 444.2            416900            46.9


                                           30
Switzerland            1700000        231.5    301350   41.0
Turkey                 1200000         18.3     70865    1.1
Ukraine                 262500          5.2     29663    0.6
United Kingdom        15200000        258.8   1956150   33.3

Source: Euromonitor (2001a, b)




                                 31
Table 6: Internet users (IU) and Internet hosts (IH) in Latin America and the Caribbean
(1999)

                           IU per 1000 people                   IH per 1000 people
Country     IU (1999)      (1999)              IH (1999)        (1999)
Argentina          520000                 14.2           132000                  3.6
Barbados            12000                 44.6               88                   0.3
Belize              20000                 85.8              260                  1.1
Bolivia             42000                  5.3              689                 0.09
Brazil            6800000                 40.3           376425                  2.2
Chile              425000                 28.5           451510                 30.3
Colombia           450000                 11.6            25110                  0.6
Costa Rica         150000                 38.6             3587                  0.9
Cuba                50000                  4.5              120                 0.01
Dominica            48000                738.5
Ecuador             16500                  1.3             1935                   0.2
El Salvador         50000                  8.2             1250                  0.2
Guatemala          100000                  9.1             1233                  0.1
Guyana                3500                 5.0               72                  0.1
Haiti                 4000                 0.5
Honduras            27000                  4.3              129                 0.02
Jamaica            100000                 39.2              386                  0.2
Mexico            2100000                 21.6           197750                  2.0
Nicaragua           25000                  5.1              865                   0.2
Panama              52500                 18.8              816                   0.3
Paraguay            20000                  3.8             2121                  0.4
Peru               400000                 15.0             5987                  0.2
Surinam             10854                 25.2                1                0.002
Trinidad            40000                 31.1             3013                  2.3
Uruguay            320000                 96.9            22706                  6.9
Venezuela          500000                 20.9            13842                  0.6

Source: Euromonitor (2001a, b)




                                           32
Table 7: Internet Penetration and related indicators for selected economies in the world
                  Internet Penetration              Factors Influencing Internet Penetration

         No. of         No. of     Rank Order
         Internet       Internet   of Internet
         users          hosts      Penetration GNP per                     Civil Liberty Literacy
         per 1000       per 1000   (within     capita ($, Pop.             Index         rate
 Country (1999)         (1999      region)     2000)      (‘000), (2000)   (2000)        (%, 2000)
Africa and
Middle
East
       Israel   155.1     23.5          1        16310          5842            2           95.7
     United                             2
        Arab
   Emirates     146.0     14.6                   17276          2369            5           74.6
      South                             3
      Africa    47.6      4.2                     3020         43421            2           84.6
      Sierra                            4
      Leone      1.5      0.0                     130           5233            5            31
Asia-
Pacific
 Singapore      340.7     21.0          1        24740           4152           5           91.8
   Australia    267.3     50.8          2        20530          19165           1            99
      Japan     162.1     18.5          3        34210         126550           2            99
      China      5.5      0.0           4         840         1261832           6           82.8
   Pakistan      0.7      0.0           5         470          141554           5            44
 Europe
    Finland 404.4         93.5          1        24900          5167            1            99
   Slovenia 246.4         13.2          2        10070          1928            2           99.6
   Portugal 81.0          7.1           3        11060         10048            1           91.4
  Romania 17.2            1.7           4         1670         22411            2           97.9
Latin
America
and
Caribbean
   Uruguay 96.9           6.9           1        6090           3334            2           97.6
  Argentina 14.2          3.6           2        7440          36955            3           96.7
     Bolivia 5.3          0.1           3        1000           8153            3           84.4
                                                 1700
      Cuba 4.5            0.0           4        (ppp)         11142            7           96.4
North
America
      USA 351.7          145.6          1        34260         275563           1            99
    Mexico 21.6           2.0           2         5080         100350           4           90.8

Notes: 1. ppp stands for purchasing power parity
       2. Civil liberty index: 1 represents most free and 7 represents least free.


                                                     33
Sources:
http://www.lyd.org/english/economic_freedom/percapita_income_troughout.pdf,
http://www.odci.gov/cia/publications/factbook/geos/cu.html#Econ, European Marketing
Data and Statistics, Freedom House, International Marketing Data and Statistics,




                                         34
      Figure 1: Number of countries connected to the Internet


250
                                                                             211      214
200                                                    191        200
                                            165
150
                                 121
100
                       81
 50          60

  0
        93        94        95         96         97         98         99         2000



                            Source: ITU (2001b)




                                        35
                  Figure 2: Uneven distribution of the Internet worldwide


           120
           100
            80                                                                         % I hosts
            60                                                                         % I users
            40                                                                         % Pop
            20
             0
                        a




                                                fic




                                                                   a




                                                                                  st
                                 e
                      ic




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                                p




                                                                               Ea
                                              ci
                             ro
                   er




                                                               er
                                           Pa
                            Eu




                                                              m
                  m




                                                                            le
                                        a-




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                                                                        M
                                     A



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                                                                      a/
                                                                    ic
                                                                  fr
                                                                 A

Sources: Kshetri and Dholakia (2002),
http://www.nua.ie/surveys/how_many_online/index.html, authors’ research




                                                              36
  Figure 3: Global distribution of Internet hosts and Internet users

                                Hosts: 10.1m
                                Users: 191m




                                                                               Hosts: 4.6m
Hosts: 42.2m                                                                   Users: 187m
Users: 183m




               Hosts: 1.0m
               Users: 33m             Hosts: 0.4m
                                      Users: 11m




  Note: Internet user data are for September 2002 and Internet host data are for the year
  1999.




                                                37
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